Gift aid on corporate donations would be worth more than £230m a year to charities, a new report by the research consultancy nfpSynergy shows.
The sum is based on figures from the NCVO’s Civil Society Almanac 2014 showing that £933m was given in corporate donations and gifts in kind in 2011/12. If charities had been able to claim gift aid on this, it would have been worth an extra £233m to the sector, making corporate donations worth a total of £1.17bn.
In 2000, reforms to corporate gift aid meant that companies could benefit from the tax relief on their donations, rather than charities, which prior to the changes could claim gift aid on corporate gifts. It was hoped that by allowing companies to reclaim the tax it would incentivise them to give more.
But as nfpSynergy’s report shows, for charities to have been unaffected by the changes, companies would have to have increased their donations by 25 per cent. If the change was reverse, companies could donate 20 per cent less without charities seeing a drop in corporate income, the report says.
Joe Saxton, founder of nfpSynergy and co-author of the report, said: “In retrospect, the charity sector got a really raw deal out of the change. The figure for the loss to the sector would have been considerably greater in 2000 because corporation tax rates were higher then.”
The Institute of Fundraising and others have long been calling on the government to reverse the changes so that charities can benefit again.
At an awards ceremony earlier this year, Mark Astarita, chair of the Institute and director of fundraising at the British Red Cross, urged the three main political parties to “give us the gift aid back on corporate donations”.
The Institute has since been speaking to members about whether they think a reversal would be beneficial and looking at the wider impacts of any change.
The nfpSynergy report shows there is lack of robust data about the impact of the change.
In February, a report by the Public Accounts Committee criticised HMRC for failing to collect data on whether gift aid and other reliefs on donations are encouraging people to give more.
It said HMRC does not have enough information about the effect of changes to corporate gift aid and highlighted an evaluation in 2005, which found some evidence that the changes “may have had a negative effect on charities”.
A decline in corporate giving
The nfpSynergy report includes figures from NCVO showing that income from companies barely increased between 2000 and 2011, and research from the Charities Aid Foundation and Directory of Social Change that found a decline in corporate giving since 2000.
The report is critical of HMRC’s failure to introduce the reforms in a “responsible and evidence-led manner”.
“This analysis has shown that for charities to have benefitted from the reform to corporate gift aid, company giving would need to have increased by more than 25 per cent. Albeit patchy, the evidence available gives no hint that this has happened, and if anything paints a far more negative picture of a downward trend in corporate giving,” it says.
The case for reversing the change would be strengthened by further work estimating how much it would be worth to the sector, it says. The potential of an extra £233m, based on NCVO figures for 2011/12, demonstrates that going back to a pre-2000 model “would bring hundreds of millions of extra revenue to the sector (with no cost to the government)", it says.
The report calls for fresh research among fundraisers, companies and other stakeholders to discover the appetite for reversing the system and any barriers to it. This could include a study of charities with trading subsidiaries and whether HMRC’s suggestion that the change was made to simplify the system and reduce the administrative burden for them, has been of benefit. “Our research has established that the (limited) evidence there is suggests the change in 2000 saw charities lose out in income, and corporate giving remain flat, if not declining, rather than increase as was hoped,” it concludes.
Peter Lewis, chief executive of the IoF, said: “We think there is value in reviewing how corporate gift aid can work best for charities. From the evidence available it looks as though the changes from 2000 haven’t resulted in an increase of company giving.
"In a time when charities are operating in a tough financial climate it is right that we should look at how the tax system can work best to maximise the amount of money going to good causes. This is a good opportunity to assess whether allowing charities to claim the tax relief on Corporate Gift Aid would increase the amount of money that they receive, whilst being cash neutral to the Treasury.”
This story was amended on the 8th May
